Step 6: Drill bigger holes
To widen them, use a 3/16 inch drill bit with a drill press or hand drill.
If you're using a hand drill, set a wooden block under each hole as you drill it, to avoid warping the case. If you're using a drill press as I did, there should be a steel pedestal with a hole for the drill bit to pass through, saving the case from serious FUBAR-age.
Have the bit spinning before you push into the center of the hole. Repeat this for all the holes. Make sure there are no burrs left on the holes or shards kicking around in the case afterwards. Bang it around a few times to get them out, the last thing you'd want is to have your 360 die from little pieces of metal shorting it out.